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Encore Capital to Acquire AACC

Zacks Equity Research

Recently, Encore Capital Group, Inc. (ECPG) announced an agreement to acquire Michigan-based Asset Acceptance Capital Corp. (AACC). The purchase consideration amounts to $200 million, based on a per-share value of $6.50. This amount translates into a 24% premium on the 30-day volume-weighted average share price of Asset Acceptance.

Encore Capital offered the Asset Acceptance shareholders the option to choose from cash, Encore Capital shares or a combination of both to receive their purchase consideration. However, the total amount of Encore Capital shares to be issued will not exceed 25% of the total Asset Acceptance equity being received.

However, the acquisition is subject to the approval of regulatory authorities as well as Asset Acceptance’s shareholders. Encore Capital expects the acquisition to be completed by the second quarter of 2013.

Asset Acceptance is proficient in acquiring consumer debt, with over 50 years of experience in the field. The company also has an experienced workforce, which will add to Encore Capital’s proficiency.

Following the acquisition of Asset Acceptance’s business, Encore Capital’s tally of individual consumer accounts will increase to 60 million, with total face value exceeding $130 billion. These accounts cover credit card, telecommunications, consumer loans and other related assets. The acquisition will not only expand Encore Capital’s portfolio, but also enhance its operating capacity.

Encore Capital carries a Zacks Rank #2 (Buy), while Asset Acceptance carries a Zacks Rank #3 (Hold). Other companies in the financial sector worth considering are FleetCor Technologies, Inc. (FLT) – Zacks Rank #1 (Strong Buy) – and Euronet Worldwide Inc. (EEFT) – Zacks Rank #2 (Buy).

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